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How to Start a Business in Malaysia

Did you know that Malaysia is the 12th easiest country to do business in? The World Bank says so! With friendly business policies, low capital requirements, and simple legal processes, it's a great place to start your company. But to really succeed in this competitive market, you need to know how to set up a company in Malaysia.

That's where SFM Consulting Firm steps in! We have prepared this article to help you learn the process of starting your own business in Malaysia. So, start reading!

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Types of Business Entities That Can Be Established in Malaysia

1

Sole Proprietorship and Partnership

In Malaysia, you need to register your sole proprietorship or partnership with the Companies Commission of Malaysia. This registration falls under the Registration of Businesses Act 1956.

Types of Business Entities That Can Be Established in Malaysia

2

Incorporated Company

If you are a foreign investor interested in setting up a company in Malaysia, incorporating a company under the Companies Act 1965 is a common approach.

Company Categories

You can classify companies as either private or public.

Private Company

  • You will face restrictions on transferring shares.
  • The maximum number of members is 50.
  • You cannot invite the public to buy shares or invest money.

Public Company

Public companies in Malaysia raise funds from the general public by offering shares for sale.

Types of Business Entities That Can Be Established in Malaysia

3

Branch of a Foreign Company

Foreign companies or foreigners setting up a company in Malaysia can choose to operate through a branch office. This is done under the Companies Act 2016. A branch office acts as an extension of the main company.

You can conduct the same business activities in Malaysia as you do in your home country. However, a branch office is not a separate legal entity. This means that the parent company bears full liability for its operations in Malaysia.

Types of Business Entities That Can Be Established in Malaysia
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How to Start A Business in Malaysia?

Here are the steps of starting a business in Malaysia.

1

Step

Develop a Business Idea

Search for a gap in the market. Think about problems that your product or service can solve. Then, talk to potential customers or mentors and ask for their feedback. They can offer valuable insights that can help you develop a solid business idea.

For instance, if you plan to sell handmade products, research if there’s demand for them locally. Use tools like Google Trends and social media to understand what people are looking for in your niche.

How to Start A Business in Malaysia?

2

Step

Conduct Local Market Research

  • Analyze the age, income level, and location of your potential customers.
  • Research your competitors pricing and marketing strategies. Read customer reviews to see what people like and dislike about their products. This can help you find areas where you can stand out.
  • Use resources like the Malaysia External Trade Development Corporation and local chambers of commerce. These organizations can provide insights into current market trends.
How to Start A Business in Malaysia?

3

Step

Secure Funding for Your Business

Here are some ways to secure funding if you want to start a business in Malaysia.

  1. Personal Savings
    Using your personal savings is the simplest way to fund your business.
  2. Bank Loans
    You can apply for small business loans from banks like Maybank, CIMB, or Public Bank. To apply, you will need several documents, including:
    1. Copy of the national identity card of the directors, shareholders, or partners.
    2. Business registration documents.
    3. Your trading license.
    4. Bank statements of the last six months.

    The interest rates for loans can differ from one bank to another. Typically, these rates range from 4% to 8% per year.

  3. Government Grants and Incentives
    The Malaysian government offers various grants and incentives for startups. For example, if your business is incorporated between January 1, 2024, and December 31, 2026, you may be eligible for a tax exemption of up to RM20 million.

    The government has also set aside RM500 million for the Malaysia Co-Investment Fund. This fund will co-invest with private investors in equity crowdfunding and peer-to-peer financing platforms. Here are some specific programs that provide financial support to startups:
    1. Cradle Fund: This program offers funding for entrepreneurs in sectors like fintech, health tech, and green technology. Grants usually range from RM50,000 to RM500,000.
    2. SME Corp Malaysia Grants: SME Corp provides grants and matching funds to help small and medium enterprises improve their productivity and competitiveness.
    3. NanoMalaysia Berhad: This agency offers grants to businesses using nanotechnology in manufacturing, healthcare, and energy.
How to Start A Business in Malaysia?

4

Step

Choose the Right Business Structure

  • Sole Proprietorship: This is ideal for individuals who want to start a small business on their own. It is easy to set up and registration costs between RM30 and RM60.
  • Partnership: This structure works well for businesses with two to twenty partners. The registration cost for a partnership business is RM60.
  • Private Limited Company: This option is suitable for larger businesses or those looking for investors. The registration costs range from RM1,000 to RM5,000, depending on your share capital.
How to Start A Business in Malaysia?

5

Step

Get a Registered Business Address

To operate a business in Malaysia, you need a registered business address. Here’s how to get one:

  • You can choose to sign up with a virtual office provider. This can be done online or by visiting their office in person. Make sure the provider offers addresses that comply with SSM requirements.
  • If you prefer a physical location, look for a space that meets your business needs. Once you find the right place, negotiate a rental agreement. You will also need to get permission from the landlord to use the address for your business registration.
  • You might be able to use your home as a registered business address. Check with your local council to see if this is allowed in your area.
How to Start A Business in Malaysia?

6

Step

Hire a Company Secretary

If you want to run a Private Limited Company in Malaysia, you need to hire a company secretary who is licensed by SSM and is based in Malaysia.

The company secretary helps keep your business compliant with legal requirements. Generally, you need to pay between RM 1,000 and RM 2,000 for secretarial services each year.

How to Start A Business in Malaysia?

7

Step

Name Your Business

Now, you need to choose a name for your business that will represent your brand to customers. Here are the steps to register your business name in Malaysia:

  • Use the SSM online portal to check if your chosen name is already in use.
  • If your name is available, you can reserve it by submitting your application through MyCoID. This reservation costs RM50 and is valid for 30 days.
  • Gather the necessary documents for registration, such as:
  1. A copy of your national identity card.
  2. A list of your proposed business names.
  3. Proof of payment for the name reservation fee
  • Visit the SSM office or use the online registration system to complete the registration process.
  • Once your application is approved, you will receive a business registration certificate.
How to Start A Business in Malaysia?

8

Step

Register Your Business with SSM

After that, register your business with the Companies Commission of Malaysia (SSM). The process varies by business type:

1

Sole Proprietorship or Partnership

  • Submission of Form A: You must submit Form A to register your business. This can be done through the EzBiz portal or by visiting an SSM branch in person.
  • Provide Necessary Documents: You need to provide these documents for your business:
Sole Proprietorship Partnership
Copy of national identity card. Copy of passport or MyKad of all partners.
Description of business activity and category code Partnership agreement
Proof of business name availability Proof of business name availability
Proof of business address (e.g., rental agreement) Business Registration Form

2

Private Limited Company (Sdn. Bhd.)

  • Access the MyCoID portal. This is the official online platform for company registration in Malaysia.
  • You will need to submit these documents:
  1. Proposed name of the company
  2. Memorandum and Articles of Association
  3. Details of company secretary
  4. Copies of passports or national identity cards of all directors and shareholders.
  5. Registered business address where your company will be located.
  • After submitting your application and required documents, there will be an approval process. Upon approval, you will receive the Certificate of Incorporation.

9

Step

Set Up a Corporate Bank Account

You can follow these steps to open a bank account in Malaysia.

  1. Select a bank that suits your needs. Some popular options in Malaysia include:
    1. CIMB Bank
    2. Maybank
    3. Standard Chartered
    4. RHB Bank
    5. Public Bank
    6. HSBC Malaysia
  2. Gather copies of the legal documents you used to register your business with SSM.
  3. Visit the bank.
  4. Give them your application along with the required documents.
  5. You will need to deposit some initial capital. This usually ranges from RM 1,000 to RM 5,000.
  6. Once your account is approved, you will receive your corporate account details.
How to Start A Business in Malaysia?

10

Step

Apply for Relevant Licenses/Permits

Check out this table to find out what licenses and permits you need to start your business in Malaysia.

Type of Business Industry-Specific Licenses Issuing Authority Applicable Fee (estimated)
Food & Beverage Health Permit, Halal Certification, Food Handling & Safety License JAKIM, Ministry of Health, Local Council Health Permit: RM 50 to RM 200
Halal Certificate: RM 100 to RM 2,500
Retail Business Retail License, Business Premise License Local Municipal Council RM50 to RM300
Export/Import Import/Export License, Customs License Royal Malaysian Customs Department RM100 to RM3,000
Manufacturing Import/Export License, Customs License Royal Malaysian Customs Department RM100 to RM3,000
Manufacturing Environmental Impact Assessment (EIA), Manufacturing License Ministry of International Trade & Industry, Department of Environment RM1,000 to RM5,000
Tourism & Hospitality Travel Agency License, Tourism License Arts and Culture, Ministry of Tourism, Tourism Malaysia Tourism License RM 200 to RM 2,000
Health, Beauty, & Wellness Beauty License, Health & Safety Certificate Ministry of Health RM500 to RM1,500
Education & Training Accreditation by Ministry of Education (MOE), Educational Institution License Ministry of Education RM1,000 to RM10,000
Real Estate Building Permit, Developer’s License, Property Agent License Board of Valuers, Appraisers, Estate Agents & Property Managers Property Agent License: RM200 to RM1,000
Media & Advertising Advertising Permit, Broadcasting License Ministry of Communications and Multimedia RM500 to RM5,000

11

Step

Register with LHDN for a Tax File Number

After you have registered a company in Malaysia, you need to register for a tax file number with the Inland Revenue Board. To complete this process, you need to prepare the following documents:

  1. Company Incorporation Certificate
  2. Company constitution
  3. Copies of the national identity cards or passports of the owners and directors
  4. Proof of your office location
  5. Bank statements
How to Start A Business in Malaysia?

12

Step

Hire Employees

If you want to hire employees for your company, you should keep these elements in mind:

  1. Register for Employment Contributions
    You need to register with several organizations, including:
    1. The Social Security Organisation
    2. The Employees Provident Fund
    3. The Employee Insurance Scheme
    4. The Tax Authority
  2. Create Employment Contract
    When you hire local employees, make sure to provide a clear employment contract. You must also enroll them in programs like EPF, SOCSO, and EIS.
  3. Follow Employment Laws
    It is important to follow the Employment Act 1955. This law sets rules for minimum wage, working hours, and other employment conditions. Currently, the minimum wage is RM 1,500 per month.
How to Start A Business in Malaysia?
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How to Set Up Business in Malaysia For Foreigners?

Setting up a business in Malaysia as a foreigner is similar to the steps mentioned in the section "how to start a business in Malaysia." However, there are some additional requirements for foreigners.

1

Step

Invent a Business Idea

If you are a foreigner, you need to make sure your business idea fits within the industries that are open to foreign investment in Malaysia. Some sectors, like technology, renewable energy, manufacturing, and tourism, allow for 100% foreign ownership. However, if you want to start a business in retail, food and beverage, or other distributive trades, you may need a local partner who holds at least 30% of the equity.

Additional Tip

You should consult the Malaysian Investment Development Authority or the Malaysia Digital Economy Corporation. They can help you confirm if your business idea is eligible.

2

Step

Meet Paid-Up Capital Requirements

Foreign entrepreneurs in Malaysia need to meet certain financial requirements to start their businesses. One of the most important requirements is the paid-up capital.

Paid-up capital requirements for foreign-owned companies

  1. Advisory or consultancy businesses: RM 500,000.
  2. Trading businesses: RM 1 million.
  3. Wholesale or manufacturing businesses: RM 2.5 million.

You must deposit this capital into your company’s corporate bank account. You will also need to declare this amount during the business registration process.

How to Set Up Business in Malaysia For Foreigners?

3

Step

Select Your Business Structure

As a foreigner, you can only register your business as a Private Limited Company (Sdn. Bhd.) or a Labuan International Company. You cannot register as a sole proprietorship or a partnership unless you have permanent residency.

How to Set Up Business in Malaysia For Foreigners?

4

Step

Obtain a Registered Business Address

Foreign-owned businesses must provide a registered business address in Malaysia. The requirements remain the same as for local businesses.

How to Set Up Business in Malaysia For Foreigners?

5

Step

Hire a Company Secretary

As a foreigner, you need to hire a licensed Malaysian company secretary. This person will perform these tasks:

  • Help you with legal compliance.
  • Take care of the business incorporation process.
  • File necessary documents with the Companies Commission of Malaysia
  • Advise you on following the rules about foreign ownership laws.
How to Set Up Business in Malaysia For Foreigners?

6

Step

Reserve the Business Name

You need to make sure that your business name follows Malaysian regulations. To check if your name is available, use the MyCoID portal. You can also reserve your name through this portal.

How to Set Up Business in Malaysia For Foreigners?

7

Step

Register Your Business

The registration process is similar for both locals and foreigners. However, as a foreigner, you need to submit some extra documents. Here is a list of the documents required for foreigners:

  • Passport copies of all foreign directors and shareholders.
  • Proof of your business address.
  • Proof of your minimum paid-up capital.
  • Approval letters from relevant authorities if you are operating in restricted sectors.

Once your registration is approved, you will receive your Certificate of Incorporation.

How to Set Up Business in Malaysia For Foreigners?

8

Step

Obtain a Business Pass

Foreigners need to have the right pass to run a business in Malaysia. Here are the types of passes you might need:

  1. Entrepreneur Pass: This pass is for business owners and directors.
  2. Employment Pass: You will need this pass if you are also employed by your company.

Additional Tip

You need to submit your business proposal to the Malaysian Investment Development Authority for approval. Then, you can apply for your pass through the Expatriate Services Division or the Malaysia Digital Economy Corporation if your business is digital.

How to Set Up Business in Malaysia For Foreigners?

9

Step

Open a Corporate Bank Account

Foreigners can open a corporate bank account in Malaysia by following the same process as locals.

How to Set Up Business in Malaysia For Foreigners?

10

Step

Apply for Licenses and Permits

Getting licenses can be tougher for foreign-owned businesses in Malaysia. For example:

  • In retail, you need to have a local partner.
  • In tourism, you must get extra permits from the Ministry of Tourism, Arts, and Culture.
  • In manufacturing, you need licenses from the Ministry of International Trade and Industry.
How to Set Up Business in Malaysia For Foreigners?

11

Step

Tax Registration

When you register for taxes, the process is the same for you as a foreigner and for locals. However, there are a few things you should keep in mind. The corporate tax rate is usually 24%. You also need to think about withholding taxes if you send money abroad. You can hire a tax consultant who understands the rules for foreign businesses in Malaysia.

How to Set Up Business in Malaysia For Foreigners?

12

Step

Recruit Employees

If you have a foreign business and want to hire local workers, you need to follow the labor laws in Malaysia. You will also need to apply for employment passes for your employees.

To qualify for an employment pass, your company must pay a minimum salary of RM5,000. If the company is fully foreign-owned, it must have a paid-up capital of at least RM500,000.

How to Set Up Business in Malaysia For Foreigners?

13

Step

Launch Your Business

After handling all the necessary regulations, you can launch your company. Before that, you can also:

Additional Tip

In Malaysia, there are agencies like the Malaysian Investment Development Authority and the External Trade Development Corporation that help foreigners set up business in Malaysia. You can expect them to:

  1. Offer advisory services on investment and legal matters.
  2. Provide training to help develop your employees' skills.
  3. Connect foreign investors with local suppliers.

Invest in Marketing and Branding

To increase your brand visibility and attract Malaysian customers to your brand, you can do the following:

  1. Sponsor local events or sports teams.
  2. Participate in trade shows to connect with potential customers.
  3. Advertise in local magazines, news portals, and on social media.
  4. Offer discounts during Malaysian festive seasons.
How to Set Up Business in Malaysia For Foreigners?
Article Reviewed By

Md Forhad Hossain

(BA-Hons, MBA, LL.B, LL.M)

Meet Md. Forhad Hossain – is an expert in company registration with over 14 years of experience. He has helped more than 400 businesses in Malaysia and over 7,000 clients from around the world start their journey successfully.

Forhad is passionate about making business registration simple and stress-free. His knowledge and dedication have earned him the trust of entrepreneurs worldwide.

If you’re looking for someone to guide you, Md. Forhad Hossain is the name you can Rely on.

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Frequently Asked Questions

To close a business in Malaysia, you need to follow a formal process that includes submitting necessary forms to SSM, settling any outstanding debts, and canceling your business licenses.

The cost of starting a business in Malaysia can vary significantly based on your business type, location, and the specific registration fees. Generally, you might need to spend RM 50,000-RM 100,000 to start a business in Malaysia.

You should register your trademarks, copyrights, and patents with the Intellectual Property Corporation of Malaysia.

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